Zedillo discusses World Bank report

Yale professor Ernesto Zedillo, president of Mexico from 1994 to 2000 and now director of the Yale Center for the Study of Globalization, recently led a review of the governance and international priorities of the World Bank. The 46-page report, “Repowering the World Bank for the 21st Century,” calls for a restructuring of the Bank’s governing bodies and a rethinking of how the Bank devises strategy, among other recommendations.

Q: Could you describe the impetus for this report? Talk a little about how you, and how the Center, came to be involved.

A: The president of the World Bank asked me whether I would be willing to chair a commission that would review the World Bank’s governance. Given that one of the core issues at the Center is global governance, I decided that it would be a project of significant interest for me and for the Center, and quite consistent with our mission. It’s a win-win situation for us because we deal with these subjects, which are of intellectual interest for the Center, and at the same time we achieve something that was very much in the idea of creating this Center, which is linking the Center or linking the University with the policy world.

Q: The commission’s report describes the problem of providing global public goods — issues such as climate change and communicable disease that cross national boundaries. How can the Bank adapt its approach to these issues going forward?

A: First, it has to have the governance to really look at these issues from that perspective. Right now what you have is a governance in which the interests of each individual shareholder prevails. The Bank needs to have a governance that provides the institution with a level of decision-making and strategy-building in which a global view is more significant. Within that framework, the Bank has to provide more resources to those endeavors, and that means that the Bank has to start reviewing its priorities — doing programs, undertaking projects that, as you mentioned, are trans-boundary. In this process, it also needs to adapt its own human resources and its internal organization to look at issues not just from the individual country perspective, but to somehow be able to catalyze partnerships among countries to tackle these problems.

Q: The commission’s report discusses the need to recapitalize the Bank, especially because the provision of these global public goods is going to be so expensive. In the wake of the financial collapse, will that recapitalization be more difficult than it otherwise may have been, and how can the Bank approach that problem?

A: I think the crisis has made political leaders more conscious of the importance of the multilateral system. When the crisis arose, it was strikingly and dramatically evident that we needed international coordination, that we needed to organize collective action. That’s when the international community started to say, “Listen, we happen to have something which is called the [International Monetary Fund], which we have neglected in recent years. We happen to have a World Bank.” I think that’s a tailwind for these kinds of institutions. On the other hand, by virtue of going through this financial crisis, it is evident that we will have even more constrained resources. Practically every government is going through tighter budgetary conditions. These will make the struggle to appropriate or to obtain resources for these institutions even harder. So it’s going to be an interesting political process. Because on the one hand, yes, leaders are more aware that they need these kinds of instruments. But on the other hand, they have to go to their congresses or parliaments and say, “I need more money for something which is not strictly national.” And this is not the best political moment to do that. But that’s what leadership is all about.

Q: The report underscores the importance of equity between developed and developing nations in terms of voice and influence in the Bank’s direction. Is there any risk that developed nations, for instance the Western European nations or the United States, would delegitimize the bank if they saw their vote share decreasing?

A: The most serious issue is, in my view, at least in the medium-term, Europe. If we really want to rebalance the voice and representation in the World Bank’s governance, then there is no other way to do it but to adjust the European countries’ representation. Now, of course, this is not easy. But, on the other hand, our European friends are very proud that during the post-war years, particularly during the last 20 years, they have undergone this process of unity. If they really mean that, they should be able to speak with less than eight or nine different voices. And eventually, they should be able to speak with only one voice. That gives us some room to increase the voices from emerging and developing countries. And yes, I suspect that [the Europeans] are not going to like that. But they have to be consistent.

Q: How, when this goes forward, will these recommendations be acted upon by the Bank?

A: First, our commission’s mandate really finished when we sent this report to the president of the World Bank. We have no responsibility or even opportunity to influence directly whether or not our recommendations are going to be considered. Of course, there is nothing that prevents the members of the commission from talking about this report to make sure the key players know about the report. Also, it has to do with how active the president of the World Bank is in submitting this report to not only the Executive Board, but rather to the governors of the World Bank. My expectation is that there’s already a commitment at the G20 to look at these issues. Maybe by the time that the next G20 meeting takes place, and also the meetings of the World Bank and the IMF take place, this report will be a subject of discussion.

Comments

George McWilliams

Zedillo lays a dud

Nothing was done by Zedillo to overcome the problem of absence of accountability and transparency that is directly linked to the privileges and immunities of the Bank.
However, the recommendation to abolish the useless and costly resident Executive Board is a good one.
With Zoellick behaving like Brezhnev,
it will probably be yet another report that accomplishes nothing and merely gathers dust.

Zoellick pretended that he had not received the Report at the Annual Meeting earlier in October.
Having Zoellick’s letter presented as the first page in a single .pdf file, supposedly sent the same day as Zedillo’s letter & the Report, is also a disgrace. The level of manipulation in such matters leaves everyone with a bad taste.